Correlation Between Ab Global and American Funds
Can any of the company-specific risk be diversified away by investing in both Ab Global and American Funds at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Ab Global and American Funds into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ab Global Risk and American Funds 2055, you can compare the effects of market volatilities on Ab Global and American Funds and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Ab Global with a short position of American Funds. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ab Global and American Funds.
Diversification Opportunities for Ab Global and American Funds
0.38 | Correlation Coefficient |
Weak diversification
The 3 months correlation between CBSYX and American is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding Ab Global Risk and American Funds 2055 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Funds 2055 and Ab Global is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Ab Global Risk are associated (or correlated) with American Funds. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Funds 2055 has no effect on the direction of Ab Global i.e., Ab Global and American Funds go up and down completely randomly.
Pair Corralation between Ab Global and American Funds
Assuming the 90 days horizon Ab Global is expected to generate 1.03 times less return on investment than American Funds. But when comparing it to its historical volatility, Ab Global Risk is 1.52 times less risky than American Funds. It trades about 0.1 of its potential returns per unit of risk. American Funds 2055 is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 2,708 in American Funds 2055 on August 30, 2024 and sell it today you would earn a total of 26.00 from holding American Funds 2055 or generate 0.96% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Ab Global Risk vs. American Funds 2055
Performance |
| Timeline |
| Ab Global Risk |
| American Funds 2055 |
Ab Global and American Funds Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ab Global and American Funds
The main advantage of trading using opposite Ab Global and American Funds positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ab Global position performs unexpectedly, American Funds can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in American Funds will offset losses from the drop in American Funds' long position.| Ab Global vs. Alpsalerian Energy Infrastructure | Ab Global vs. Jennison Natural Resources | Ab Global vs. Guinness Atkinson Alternative | Ab Global vs. Calvert Global Energy |
| American Funds vs. T Rowe Price | American Funds vs. Tiaa Cref Small Cap Blend | American Funds vs. Pgim Jennison Diversified | American Funds vs. Delaware Limited Term Diversified |
Check out your portfolio center.Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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